Sunday, August 15, 2010

Mackay: Eye success even amid a downturn

The unemployment rate hovers around 10 percent - far higher if you include those who have given up looking.

Still, things have been worse. The U.S. unemployment rate during the Great Depression reached a high of 25 percent in 1933 and remained above 15 percent through 1940.

No one in his right mind would have thought of starting up a business during a rocky, hardscrabble era like that.

Or would he? Research business history from October 1929 to December 1940, and you'll find some astonishing and uplifting facts:

• Howard Johnson's was a single restaurant until 1932. Through franchising, it added 40 more restaurants by the end of 1936 and had a total of 107 units by 1939.

• Boeing created the first modern airliner - the 247 - in 1933, during the depths of the Depression.

• Hewlett-Packard originated in a Palo Alto, Calif., garage in 1935.

• Hormel introduced its canned chili in 1936 and Spam in 1937, while the Depression was in full swing.

• The Estee Lauder Companies came into being in 1935.

• Curt Carlson founded the Carlson Companies - today a multibillion-dollar behemoth - in 1938 with a $55 loan.

Well and good, you may say, but this was all before the era of information technology. Remember the face of technology is an ever-changing one.

The world of high-tech audio today may be all about the MP3.

Back in 1934, while the likes of John Dillinger and Baby Face Nelson were robbing the banks of Middle America, the Hammond organ was being invented. This seemingly tame breakthrough revolutionized the world of music, from radio broadcasts to church services.

A downturn can spark great things. I've learned more than a few people who lose their jobs in a stalled economy decide to give the "entrepreneurial thing" a shot. They may end up investing their entire life's nest egg on a fling.

In 1975, at the end of another serious recession, Roger Schelper and his buddies decided to open what is today Davanni's, a New York-style pizzeria in Minneapolis-St. Paul, Minn.

Launching a business, especially in tough times, is a high-risk play that you should only consider with a cool head, a solid plan and the anticipation that you will have to dedicate an incredible amount of personal work and patience.

Here are some of the things that Schelper learned in his venture that any budding entrepreneur should bear in mind during a downturn or, for that matter, at any time:

• Research the market carefully. Your chances often hinge on identifying an attractive, unoccupied market niche - one that you have the know-how and raw ingredients to fill with authority.

• Know the success factors. In the restaurant business, for example, you could be the greatest chef since Julia Child and still end up eating your own leftovers. Running a successful restaurant has a three-course menu: location, location, location. Schelper's team zeroed in on a high-density trading area of customers with ideal buying traits, finding an optimum site with the right zoning. They were cooking with all the right ingredients.

• Be tightfisted about raises, especially with your own. Schelper clocked 80- to 90-hour workweeks from the get-go. He gave himself his first raise after the business retired a small loan. Get this: It was the first time the business paid him even minimum wage!

• Do something you love. "If you don't, you won't be able to put in the necessary hours to make the venture work," Schelper says.

Today, Davanni's has more than 20 pizza shops and a dedicated customer and employee base. But there's one other fact worth remembering. Schelper was the kind of guy who was paying his way from the time he was 11, shoveling snow and mowing lawns throughout the neighborhood while he carried two paper routes. So before you make the leap and open that bed and breakfast or sink your savings into a digital widget factory, take a long, hard look at your track record. Do you have the makeup to take this kind of a pounding?

Mackay's Moral: Entrepreneurs who make it are usually born entrepreneurs to start with.

by Harvey Mackay August 9, 2010

Mackay: Eye success even amid a downturn

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